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The usefulness of the formal-informal dichotomy has constantly been debated in the field of economics, leading to a reconsideration of the conceptual and empirical basis of the formal-informal divide, and the assessment of its policy implications. It is argued that the tendency to associate ‘informal’ with ‘unstructured’ and ‘chaotic’ must end. Such an association is conceptually unsound and has led to policy disasters as the state sought to provide ‘structures’ where none was presumed to exist before. Instead, the terminology of informal-formal can be used to characterize a continuum of the...

The usefulness of the formal-informal dichotomy has constantly been debated in the field of economics, leading to a reconsideration of the conceptual and empirical basis of the formal-informal divide, and the assessment of its policy implications. It is argued that the tendency to associate ‘informal’ with ‘unstructured’ and ‘chaotic’ must end. Such an association is conceptually unsound and has led to policy disasters as the state sought to provide ‘structures’ where none was presumed to exist before. Instead, the terminology of informal-formal can be used to characterize a continuum of the reach of official intervention in different economic activities, especially since official statistics already use variants of such a criterion. However, it is emphasized that ‘more’ or ‘less’ reach is not necessarily ‘better’ or ‘worse’.